Tips to help clients claim exempt current pension income
With June 30 approaching, it is a good time to remind trustee clients paying pensions of some simple tips to ensure they correctly claim their entitlement to ECPI for the year.
Timing of pension payments
Payments must be 'cashed' (that is ‘paid') by June 30. The best way to meet this requirement is to ensure pension payments are not left until the last minute.
Missing the minimum pension payment
Where a fund fails to meet the minimum pension payment requirements for an account-based pension (including a transition to retirement or allocated pension) in an income year the fund may not be entitled to treat income or capital gains as exempt current pension income (ECPI) for the year. You can also find updated material on the ATO’s website.
Segregation of pension assets
The issue of segregation is an important one in relation to ECPI calculations by the fund. There has been much discussion around the commissioner’s view on when an asset of a complying super fund will satisfy the definition of a ‘segregated’ asset, in particular around the treatment of bank accounts. A new Taxation Determination dealing specifically with bank accounts has been issued.
In the meantime, we continue to work on the residual issues identified during the consultation process for the now withdrawn TD 2013/D7, which initially set out the commissioner’s preliminary view that an asset could not be partially segregated.
Apportionment of expenses
The tax rules relating to deductibility of expenses under s 8-1 of the Income Tax Act are also very important when a fund is claiming ECPI. Late last year we released draft tax ruling TR 2013/D7 which focuses on the apportionment of expenses incurred by a super fund where a fund derives both assessable and non-assessable income.
The finalisation of this ruling is occurring concurrently with the ATO working towards clarifying residual issues currently dealt with in TR 93/17. It’s expected this will result in consultation on a separate ruling, dealing with expenses incurred by a super fund in complying with super laws in the near future. TR 93/17 will be withdrawn when the rulings are finalised.
This piece was written by a spokesperson from the ATO